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EasyJet, Lufthansa bid to break up Alitalia

British budget airline easyJet and German carrier Lufthansa both said on Monday they had submitted offers for parts of Italy's ailing Alitalia.

EasyJet, Lufthansa bid to break up Alitalia
If Alitalia is broken up, it could spell job losses in Italy. Photo: Alberto Pizzoli/AFP.

The stricken carrier said that it had received seven binding offers in all, without providing details.

The easyJet and Lufthansa proposals will spark disappointment in Italy, which wants to sell Alitalia in one package to avoid mass job losses.

The Lufthansa Group said it was after “only parts” of the global traffic network as well as European and domestic point-to-point business of the national carrier, which it would use to establish a “NewAlitalia“.

EasyJet said it too was interested “in certain assets of a restructured Alitalia”, without providing details. The budget airline said there was no certainty that any transaction would proceed.

The struggling Italian carrier received a boost Friday when Rome said it would add €300 million ($355 million) to a bridging loan package.

As the deadline for making binding offers expired on Monday evening, the company said it had received “seven envelopes” with offers and “the Special Commissioners of Alitalia will now begin evaluating the envelopes”.

The Lufthansa and easyJet interest left trade unions cold.

“Today was supposed to be a decisive day for Alitalia's future,” the UGL union's secretary Paolo Capone said.

“However as one could expect, in a market of sharks, the offers made are underbids which will have a negative impact on the future employment of its workers,” he added.

Alitalia, struggling to compete with low-cost rivals, went into administration at the start of May after staff rejected job and salary cuts as part of a €2 billion rescue plan.

In May, Rome said it would provide a €600 million loan to keep the carrier's planes in the air for around six months, staving off liquidation of the flagship airline.

Irish no-frills carrier Ryanair expressed early interest but two weeks ago said it was dropping the idea as it struggles with the fallout from thousands of cancellations of its own flights owing to a pilots' shortage.

BUSINESS

EU finds Italy’s Alitalia loans ‘illegal’ but airline free to keep money

The EU's antitrust authorities ruled Friday that Italy's 900 million euro loans to long-struggling airline Alitalia were "illegal", but cleared the country's new carrier to get state funding and avoid paying back the money. 

Ahmad AL-RUBAYE / AFP
Ahmad AL-RUBAYE / AFP

“Following our in-depth investigation, we reached the conclusion that two public loans worth EUR 900 million granted by Italy to Alitalia gave the company an unfair advantage over its competitors, in breach of EU State aid rules,” said EU competition chief Margrethe Vestager said in a statement.

“They must now be recovered by Italy from Alitalia to help restore a level playing field in the European aviation industry.”

But the authorities in Brussels simultaneously said new flag airline ITA – set to start flying next month – was not liable to reimburse the money and that 1.35 billion euros being injected into the firm by Rome did not breach state aid rules.

“Italy has demonstrated that there is a clear break between Alitalia and the new airline ITA, and that its investment in ITA is in line with terms that a private investor would have accepted,” Vestager said.

“Once ITA takes off, it is for Italy and ITA’s management to make use of this opportunity once and for all. And we will continue to do our part to ensure fair competition in the European aviation sector.”

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Loss-making Alitalia was placed under state administration in 2017 but Italy has struggled to find an investor to take it over. The situation was only exacerbated by the coronavirus pandemic that grounded airlines worldwide.

The Italian government gave the company two loans for the amount of EUR 600 million and EUR 300 million in 2017, as Alitalia scrambled for liquidity without access to the debt market.

Earlier this year Italy said it had reached an agreement with the European Union for a bailout that creates a new debt-free company to take over some of Alitalia’s assets – ITA.

The board of directors of ITA last month approved a binding offer for 52 of Alitalia’s aircraft, related airport slots and other assets.

The Italian government has created a 100-million-euro ($117-million) fund to reimburse Alitalia customers.

Italy provided state loans to Alitalia totalling 1.3 billion euros between 2017 and 2019.

In July, it approved another 700 million euros for ITA.

Further sums are expected in 2022 and 2023, bringing the total to 1.35 billion euros.

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